The tender and receipt of the actual commodity, or, in the case of agricultural commodities, warehouse receipts covering such commodity, in settlement of a futures contract. Some contracts settle in cash (cash delivery), In which case open positions are marked to market on the last day of the contract based on the cash market close.
The premiums paid for the grades better than the basis grade and the discounts allowed for grades lower than the basis grades. These differentials are fixed by the contract terms on most exchanges.
A term used to designate any or all contracts covering the sale of commodities (including financial instruments and cash representing indexes) for future delivery made on an exchange and subject to its rules.
Usually limited partnerships for investors who prefer to participate in the futures market by buying shares in a fund managed by professional traders or commodity trading advisors.
A sale of futures contracts to offset the ownership or purchase of the underlying cash commodity in order to protect it against adverse price moves; or, conversely, a purchase of futures contracts to offset the sale of the underlying cash commodity, again for protection against adverse price moves.
In call options, when the strike price is below the price of the underlying futures. In put options, when the strike price is above the price of the underlying futures. In-the-money options are the most expensive options because the premium includes intrinsic value.
